The underlying principles of the blockchain
The following are the five basic principles underlying the technology.
- Distributed database: Every participant on the blockchain has access to the entire database and its complete history. No single participant controls the data or information and every one of them can verify the records of the transaction partners directly, without any intermediary.
- Peer-to-peer transmission: Communication occurs directly between peers instead of through a central node. Every node stores and forwards information to all the other nodes.
- Transparency with pseudonymity: Every transaction and its associated value is visible to anyone with access to the system. Every node or user on a blockchain has a unique 30+ character alphanumeric address that identifies it. Users can choose to remain anonymous or provide proof of their identity to others. Transactions take place between blockchain addresses.
- Record irreversibility: When the transaction is entered in the database and the accounts are updated, the records cannot be altered because they are linked to every transaction record that is previously recorded. Various types of computational algorithms and proposed approaches are deployed to ensure that the recording on the database is permanent, ordered in proper sequence and available to all others on the network.
- Computational logic: Because of the digital nature of the ledger, blockchain transactions cannot be tied to computational logic and programmed. So, users can set up algorithms and rules that automatically trigger transactions between nodes.